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Airbus Sees Opportunity In A350 Aftermarket Support

Why OEMs are fine with airlines that do not want dedicated spare-parts stocks.

Airbus, eyeing a major share of the A350 aftermarket-support business, is finalizing its first maintenance, repair, and overhaul (MRO) agreement with an A350 customer and is in talks with several more, a company executive confirms.

The inaugural deal, a 12-year agreement, is at the airline’s board-approval stage, says Pierre Yves Reville, Airbus vice president for services-solutions. A formal announcement is expected by summer.

“This is the first step into a very promising market,” Reville says. “I think airlines understand that on a high-tech aircraft with parts that have very high reliability and very high costs . . . investing by themselves in inventories or trying to manage maintenance by themselves doesn’t make sense.”

The deal will be an Airbus Flight Hour Services (FHS) agreement. Airbus offers two FHS packages: FHS Component, in which operators pay per flight hour for access to spares pools, including critical line-replaceable units; and the FHS Tailored Support Package (TSP), which adds options such as engineering services, airplane-health monitoring and management of airframe work.

Airbus is talking with at least five other A350 customers about FHS packages, including one in Latin America, one in Europe, and three in the Asia-Pacific region.

As airlines look to minimize parts-stocking costs, particularly with the newest-generation aircraft, spares pools have never been more popular. Increased technological sophistication and improved reliability mean that complex components for models such as the A350 and Boeing 787 are needed less often than similar parts on earlier-generation aircraft. This makes them more expensive to stock—and more challenging to stock in the right locations within a single airline’s network.

As a result, operators are turning to aftermarket services and logistics experts—ranging from traditional aftermarket providers such as Air France Industries-KLM Engineering & Maintenance (AFI KLM) and Lufthansa Technik—to component manufacturers themselves, to provide on-demand pools for certain parts. 

The airframe manufacturers are involved as well and believe they are in the most strategically beneficial positions to help their airline customers. Boeing has about 1,700 aircraft under some sort of material management agreement, including deals that involve partners like AFI KLM, says Joe Dunne, director of material management services for Boeing Commercial Aviation Services. He believes airframe manufacturers have a trump card that other pooling services providers cannot beat: depth of inventory.

“If I don’t have it in my pool, I probably have it in my production supply chain or in my spare parts supply chain,” he told delegates at Aviation Week’s MRO Americas Conference in Miami Beach April 15.

Factor in the lower costs that make attractive so-called open pooling—in which all parts are shared among those who pay in—and the manufacturers are building a strong case. Reville says that fewer airlines are investing in so-called initial provisioning (IP) spares packages for new fleets, which can run anywhere from $10-20 million for an airframe with access to used-parts inventories, such as the Boeing 777 or Airbus A330, to twice that or more for the newest aircraft.

“This is where the FHS offering on a per-flight-hour basis is appealing,” Reville says, noting that access to a pool of 600-800 A350 components would cost $15-20 per flight hour.

Airbus calculates that an airline needs 80-90 A350s before it can economically justify its own spares pool. A typical A350 IP package for a fleet of 10-12 aircraft can run $30 million.

Airbus’s FHS Component and TSP offerings have been slower to take off than Boeing’s comparable products. Reville says the size of the current pool of aircraft under Airbus’s managed-care services is close to 200, with 11 announced customers, and includes A320s, A330s and A380s.

But the European manufacturer says interest is picking up. Reville expects 70-75% of the A350 fleet will be covered by spares pools, either via Airbus FHS or competitive offerings.

Meanwhile, several FHS customers are looking to expand coverage to other aircraft in their fleets. Singapore Airlines (SIA) is in talks on a TSP setup for its A380s. The carrier has its A330s under an agreement that includes engineering services handled by SIA Engineering, and had its recently phased out A340s under a similar deal.

Thai Airways, which has A380s and A320s under an FHS deal, is considering adding both A330s and A350s.

Airbus is also talking to several would-be new aftermarket-support customers. It is in deep discussions with a Latin American A350 customer on a support package and is in “advanced discussions” with at least two carriers in China that could lead to deals “in the coming year,” Reville says.

A380 FHS deals have proven particularly popular in part because of the costs of the aircraft’s spares, but also because operators fly so few of them, rendering individual spares pools uneconomical. As of March 31, 156 A380s were in service with 13 operators, but only Emirates and SIA had at least 20. 

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